Nat'l Nail Corp. v. United States

• Decision Date: 02 January 2018
• Docket Number: Slip Op. 18–1,Consol. Court No. 16–00052
• Citation: 279 F.Supp.3d 1372
• Parties: NATIONAL NAIL CORP., Plaintiff, Shandong Oriental Cherry Hardware Group Co., Ltd., Consolidated–Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

279 F.Supp.3d 1372

NATIONAL NAIL CORP., Plaintiff,Shandong Oriental Cherry Hardware Group Co., Ltd., Consolidated–Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 18–1

Consol. Court No. 16–00052

United States Court of International Trade.

January 2, 2018

Adams C. Lee, Harris, Bricken, McVay LLP, of Seattle, WA, argued for plaintiff National Nail Corp.

Brittney R. McClain, Kutak Rock LLP, of Washington, DC, argued for consolidated-plaintiff Shandong Oriental Cherry Hardware Group Co., Ltd. With her on the brief were Lizbeth R. Levinson and Ronald M. Wisla.

Sosun Bae, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. With her on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of Counsel on the brief was Jessica R. DiPietro, Attorney, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington, DC.

OPINION and ORDER

Eaton, Judge:

This consolidated action¹ involves the final results of the sixth administrative review of the antidumping duty order on imports of certain steel nails from the People's Republic of China ("China" or the "PRC"), covering the August 1, 2013, through July 31, 2014, period of review ("POR"). See Certain Steel Nails From the PRC , 81 Fed. Reg. 14,092 (Dep't Commerce Mar. 16, 2016), as amended, 81 Fed. Reg. 19,136 (Dep't Commerce Apr. 4, 2016) (correction notice), and accompanying Issues and Decision Mem., P.R. 259 ("Final Issues & Dec. Memo") (collectively, the "Final Results").

In the Final Results, the United States Department of Commerce's ("Commerce" or the "Department") determined that consolidated-plaintiff Shandong Oriental Cherry Hardware Group Co., Ltd. ("Shandong"), a mandatory respondent in the review, was not eligible for a separate rate, and assigned it the PRC-wide rate of 118.04 percent, based on adverse facts available ("AFA"). Commerce also collapsed Shandong and its five affiliates² into a single entity stating that it was doing so in order to avoid circumvention of the PRC-wide rate. See Final Issues and Dec. Memo at 1–2.

Before the court, Shandong and plaintiff National Nail Corp. ("National Nail")³ (collectively, "plaintiffs") challenge Commerce's use of AFA and its assignment of the PRC-wide rate to Shandong and its affiliates, as unsupported by substantial evidence and otherwise not in accordance with law. See National Nail's Mem. Supp. Mot. J. Agency R., ECF No. 34 ("National Nail Br."); National Nail's Reply, ECF No. 49; Shandong's Mem. Supp. Mot. J. Agency R., ECF No. 35–2 ("Shandong Br."); Shandong's Reply, ECF No. 50. Plaintiffs argue that Commerce's use of AFA was not justified, and that the record supports a finding that Shandong was eligible for a separate rate. Accordingly, plaintiffs ask the court to remand this matter to Commerce to re-determine Shandong's antidumping rate. See National Nail Br. 45; Shandong Br. 35.

The United States, on behalf of Commerce, argues that the Final Results should be sustained. See Def.'s Resp. Opp'n Pls.' Mot. J. Agency R., ECF No. 41.

Jurisdiction lies pursuant to 28 U.S.C. § 1581(c) (2012). Because Commerce improperly imputed the incompleteness and unreliability of some of Shandong's questionnaire responses to its separate rate responses, this matter is remanded to Commerce for further action in accordance with this Opinion and Order.

BACKGROUND

In August 2008, Commerce issued an antidumping duty order on certain steel nails from the PRC. See Certain Steel Nails From the PRC , 73 Fed. Reg. 44,961 (Dep't Commerce Aug. 1, 2008). Since then, the order has been the subject of annual administrative reviews, pursuant to 19 U.S.C. § 1675(a) (2012). For the sixth administrative review, Commerce selected Shandong as a mandatory respondent.⁴

Initiation of Antidumping and Countervailing Duty Admin. Reviews , 79 Fed. Reg. 58,729 (Dep't Commerce Sept. 30, 2014).

In November 2014, the Department issued its standard nonmarket economy ("NME") antidumping questionnaire to Shandong. See Commerce's Original Questionnaire to Shandong (Nov. 20, 2014), P.R. 31, ECF No. 52–6, bar code 3242605–01 ("Original Questionnaire"). Section A of the Original Questionnaire requested information regarding Shandong's corporate structure, accounting practices, and general information about sales of the merchandise under review. It also contained a subsection of questions that a company seeking a separate rate had to complete. This subsection included questions about corporate ownership, control, management, and any ownership or control by a provincial or local government. See Original Questionnaire at A–1 to A–5.

Section C sought information regarding the U.S. market, including Shandong's U.S. sales and other data necessary to calculate the price of its merchandise sold in or to the U.S. market during the POR (export price); and Section D asked for data regarding Shandong's factors of production ("FOP"), i.e ., the inputs consumed to produce the nails it sold in or to the United States during the POR.⁵

In addition to the Original Questionnaire, Commerce issued multiple supplemental questionnaires—eleven of them in all over the course of four months. Specifically, between April 20, 2015, and July 2, 2015, Commerce issued four supplemental Section A questionnaires, two supplemental Section C questionnaires, and five supplemental Section D questionnaires. Commerce was not satisfied with Shandong's responses, however, and in August 2015, preliminarily determined that its responses were generally incomplete, inaccurate, and unreliable. Therefore, Commerce determined that Shandong "significantly impeded" the proceeding, and thus, that the use of "facts otherwise available," pursuant to 19 U.S.C. § 1677e(a), was justified. See Certain Steel Nails From the PRC , 80 Fed. Reg. 53,490 (Dep't Commerce Sept. 4, 2015), and accompanying Decision Mem. for the Prelim. Results of the 2013–2014 Antidumping Admin. Review (Aug. 28, 2015), P.R. 217 ("Preliminary Issues & Dec. Memo"). Also, because Commerce found that Shandong had failed to cooperate to the best of its ability in responding to Commerce's requests for information, Commerce drew an adverse inference in selecting from among the facts available, pursuant to 19 U.S.C. § 1677e(b). See Preliminary Issues & Dec. Memo at 1.

Despite its determination that Shandong's questionnaire responses were generally incomplete and unreliable, Commerce found that Shandong's financial statements, submitted in response to the Section A questionnaire, nonetheless could be used as a basis for its affiliation determination. By way of explanation, Commerce stated:

While[ ] the Department has found that [Shandong's] submissions were generally so incomplete and unreliable that we could not use them[,] the Department finds that the record evidence to which it is citing for the affiliation determination is independent, audited financial statements which were not prepared for purpose[s] of this administrative review and thus may be relied on for purposes of determining that [Shandong] is affiliated with its five reported PRC affiliates.

Preliminary Issues & Dec. Memo at 11. In particular, Commerce found that the record indicated

(1) the PRC shareholders of [Shandong] are family members (Family B)^{[6 ]} and thus represent a "family grouping" that may be in a position to "exercise restraint or control" over [Shandong]; (2) both [Shandong] and Shandong Oriental Cherry I & E are wholly owned by Family B; (3) Jining Huarong Hardware is the wholly-owned subsidiary of [Shandong]; and (4) [Shandong] is the largest shareholder of Heze Products Co., Jining Dragon Fasteners, and Jining Yonggu Metal.

Preliminary Issues & Dec. Memo at 10–11. Commerce therefore collapsed Shandong and its affiliates into a single entity. See Final Issues & Dec. Memo at 62–63.

When it came time to determine Shandong's eligibility for a separate rate, however, Commerce found it could not rely on the separate rate responses Shandong submitted in response to the Section A questionnaire. This was not because it found anything lacking in the questionnaire responses that sought information relating to Shandong's eligibility for a separate rate. Rather, because Commerce found incomplete and unreliable Shandong's Section C and Section D questionnaire responses regarding its affiliate Jining Dragon Fasteners' production and U.S. sales of shooting nails, it concluded that the separate rate responses must be unreliable too. See Final Issues & Dec. Memo at 57 ("[T]he incompleteness and unreliability of information concerning Jining Dragon Fasteners' sales of shooting nails calls into question the ability of the Department to rely on the separate rate information provided by Jining Dragon Fasteners, which includes pertinent information on its sales process, such as the negotiation of subject merchandise sales to the United States and the setting of prices with other exporters during the POR. As such, what information we do have on the record calls into question the reliability and completeness of the separate rate information submitted for [Shandong], as a whole."). In other words, although Commerce considered the financial statements that Shandong submitted as a part of its Section A responses reliable for purposes of its collapsing determination, it deemed those responses unreliable for purposes of determining Shandong's eligibility for a separate rate, based on its decision to apply AFA to Shandong's Section C and D questionnaire responses. Therefore, the Department concluded that Shandong was not eligible for a separate rate and assigned Shandong and its affiliates the PRC-wide rate of 118.04 percent. See Final Issues & Dec. Memo at 63. Notably, at no point did Commerce question the reliability of answers to questions designed to determine the extent of Shandong's relationship to the Chinese...